Entries from September 2008 ↓

Setting Up a Branch Office in India

Foreign companies who are engaged in manufacturing and trading activities outside India are allowed, by Indian law, to set up branch offices in India for the following purposes:

  • Export/Import of goods
  • Rendering professional or consultancy services
  • Carrying out research work, in which the parent company is engaged.
  • Promoting technical or financial collaborations between Indian companies and parent or overseas group company.
  • Representing the parent company in India and acting as buying/selling agents in India.
  • Rendering services in Information Technology and development of software in India.
  • Rendering technical support to the products supplied by the parent/ group companies.
  • Foreign airline/shipping Company.

The branch office is not allowed to carry out manufacturing activities on its own but is permitted to subcontract these to an Indian manufacturer.

Branch offices, which are established with the approval of RBI, may remit part of the profit of the branch outside India, after deducting applicable Indian taxes and subject to RBI guidelines. Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

For obtaining approval from RBI and to register with the Registrar of Companies, the following documents are required for opening a branch in India:

  • A copy of Board Resolution for opening Branches in India. (Notary and consulate by Indian embassy)
  • A copy of Certificate of incorporation of your company abroad
  • A copy of Memorandum of the company.
  • List of Directors/Key Persons of the company
  • List of Branches in other countries if any
  • Brief profile of the business activity
  • Proposed address of the branch in India.

All the documents are required in duplicate.

New guideline issued by the RBI

Changes in Service Tax Return

CBEC issued Notification No.31/2008, incorporated certain changes in Service Tax Return to give effect of the amendment initiated through Finance Act 2008. The changes will be applicable for the Service Tax Return to be filed for the first half of Financial Year 2008-09. Due date for the same is 25th October 2008. Now, the assesses will have to submit the following additional details in their Service Tax Return:

  1. Details of any Advance Tax Paid of Service Tax under Rule 6(IA).
  2. Details of Adjustment for Advance tax earlier paid.
  3. Details of option availed under new Rule 6(3) CENVAT Credit Rules 2004, i.e. either paying 8% of exempted services or using CENVAT on Prorata Basis.
  4. Details of Exempted Goods cleared or Exempted Services rendered through a new entry 5AA.
  5. Apart from this, the code for the new service become taxable after this Finance Act 2008 has been added in the instruction to Service Tax Return form.

Processing of returns for A.Y. 2007-08 – Steps to clear the backlog


Ministry of Finance

DEPARTMENT OF REVENUE (Central Board of Direct Taxes)

Subject: Processing of returns for A.Y. 2007-08 – Steps to clear the backlog – regarding

Instruction No.12 /2008

File No.225/106/2008-ITA-II

Date.05 Sep 2008





All Chief Commissioners of Income tax/

All Directors General of Income Tax.

Processing of returns for A.Y. 2007-08 – Steps to clear the backlog – regarding.


Kindly refer to above.


2. A review of CAP-II statements for June and July 2008 shows a large pendency of returns for A.Y. 2007-08 in almost all CCIT Regions. The Board had earlier kept a target of 4-6 months for processing of returns. The criteria for matching claims for granting TDS certificates were relaxed in June 2006 in order to expedite the processing of pending returns and necessary instruction in this regard was issued vide Instruction No.6/2008 dated 18th June, 2008. However, the number of returns processed has not shown any significant improvement. A large number of electronic returns for A.Y. 2007-08 as also refund returns are still pending for processing. The Board is concerned about a slow pace of progress in this regard. In order to speed up the processing of pending returns for A.Y. 2007-08, it has been decided to adopt the following strategy:-


(1) All pending returns for A.Y. 2007-08 involving refund claims (including electronic returns with refund claims) must be processed on priority basis by 30th September, 2008. Where any scrutiny assessment is pending in these cases, refund should be issued only after completion of the scrutiny assessment.


(2) For processing electronic returns involving refund claims, TDS data supplied by DGIT (Systems) on CDs along with AST instructions 68 may be utilized.


(3) Refund returns involving inter-RCC migration of PAN may be processed on TMS.


(4) Since data of electronic returns is already on the system, once this is acquired into the RCC data base, it will become part of the selection process under CASS. Therefore, electronic returns for A.Y. 2007-08 not involving refund claims can be taken up for processing after 30th September. However, it has to be ensured that all such returns are acquired and incorporated into RCC data base before the next round of CASS is run.


(5) Returns in forms ITR-4 and 5 filed in paper made by business assesses and not covered by section 44AB of the Income Tax Act, 1961 should be taken up for processing on AST at the stations on network, on priority basis at the earliest before next round of selection through CASS.


(6) Salary returns for A.Y. 2007-08 in which there is no refund or demand and the TDS claim is below Rs.5 lakh, may be given the last priority for processing.


This may be brought to the notice of all concerned for strict compliance. Any difficulties arising in processing of returns on AST may be brought to the notice of DGIT (Systems) and, wherever necessary, to the Board.




(Renu Jauhri)


Director (ITA-II)

Scrutiny of FBT returns

Ministry of Finance
DEPARTMENT OF REVENUE (Central Board of Direct Taxes)
Subject: Scrutiny of FBT returns – regarding
Instruction No.11 /2008
File No.225/44/2008-ITA-II

Date.05 Sep 2008



All Chief Commissioners of Income tax/
All Directors General of Income Tax
Scrutiny of FBT returns – regarding.
Kindly refer to above.

2. I am directed to state that all the Corporate cases selected for scrutiny as per the guidelines contained in the Action Plan document 2008-09 which have returned income to Rs.5 crore or more and where provisions of Fringe Benefit Tax (FBT) apply, assessment order shall also be passed u/s 115 WE of the Income-tax Act, 1961 after scrutiny of all such cases.

This may be brought to the notice of all concerned.


(Renu Jauhri)

Director (ITA-II)

ASBA – the new investor friendly way to apply for IPOs

In its tradition of constantly providing innovative and investor friendly services, Bombay Stock Exchange Ltd. (BSE) has developed an interface for the banks to participate in the ASBA (Application Supported by Blocked Amounts) process. This new initiative is in the area of IPO payments as proposed by the capital markets regulator, Securities and Exchange Board of India (SEBI).

The objective of introducing ASBA is to ensure that the investor’s funds leave his bank account only upon allocation of shares in public issues. The ASBA process also ensures that only the requisite amount of funds are debited to the investor’s bank account on allotment of shares. In this mechanism, the need for refunds is completely obviated.

Using this interface the banks, participating in the IPO process would be able to upload the bids with respect to their customers, into the electronic book of BSE. The interface facilitates not only the controlling branch but also the designated branches of the banks to directly upload the bids into the electronic book at BSE. The ASBA application has been successfully tested with eleven banks.

SEBI vide its circular no. SEBI/CFD/DIL/DIP/31/2008/30/7 (July 30, 2008) introduced a supplementary process of applying in public issues, viz., the “Applications Supported by Blocked Amount (ASBA)” process.

The ASBA process shall be available in all public issues made through the book building route.

The main features of ASBA process are as follows:

  1. Meaning of ASBA: ASBA is an application for subscribing to an issue, containing an authorisation to block the application money in a bank account.
  2. Self Certified Syndicate Bank (SCSB): SCSB is a bank which offers the facility of applying through the ASBA process.

For more details on the ASBA process, please refer to the SEBI circular mentioned above.

The list of SCSBs are as below. For details of designated branches click on respective banks below:

Should i pay extra tax while purchasing goods on bills in Inida?

After implementation of  VAT in india retailers are making extra money for selling goods on bills.
Suppose i bought a branded ceiling fan in Delhi and retailer have quoted a price Rs.1200 nothing else but as soon i asked for a bill he told me to pay  12.5% VAT extra on Rs.1200.
In VAT system retailer purchase goods after paying tax to the manufacturer it means whatever tax he has paid to the manufacturer is already included in his cost and that should not affect by taking bill or not.
Only VAT on retailer’s markup is to be added if i take bill from him not full tax on whole amount. In this way retailer are making fool to the consumers. Further what they do, they sell the bills to a seprate person and earn extra money by selling bills without goods.
By this excercise they are evading income tax as well as VAT and cosumers are suffering. So please always negotiate for including VAT pricae and ask for bill.


Is it necessary to register the Sole Proprietorship firm in India?


There is no formal registration is required for a sole proprietorship. You simply have to open a bank account with the name & style you want to work. But if you are liable for state VAT or service tax registration, then you have to obtain VAT and/or service tax registration. Further, for sole proprietorship, no separate income tax PAN is required. The PAN of the proprietor will be the PAN of the firm and proprietor will have to file income tax return in his personal name.

Now after announcement of KYC norms by RBI, it is mandatory to have at least two registration in the name of sole proprietorship firm. So now you have to submit two documentary proof for the name of sole proprietorship firm. Normally owner can get registration under shop & establishment act and under service tax or VAT.


Visit our new website: www.mukeshraj.com